Labor stands by its lucrative lease

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The Labor Party has defended the lease of its Canberra
headquarters, which has led to a Commonwealth Government tenant
paying way over the market rent for the property.

In its final submission to the royal commission investigating
the deal, the ALP points to more than 25 other examples of
Commonwealth Government leases which contain similar clauses to the
ones for the Canberra property, Centenary House.

The Centenary House lease, which started in 1993, contained an
escalator clause which means the rent rises by 9 per cent a year
for the 15 years of the lease. The rent can only be reviewed if it
falls below the market rate.

This escalator has led to the Australian National Audit office,
which occupies most of the building, paying between two and three
times the current market rate for the office space.

In particular, it has cited the lease of the Australian
Surveying and Land Information Group building in Canberra, in which
the Commonwealth agreed to a 10-year lease with a 9 per cent a year
rent increase.

The deal was signed a few months before the Centenary House
lease, with both buildings being developed by Lend Lease.

Counsel assisting the inquiry, Lindsay Foster, SC, has argued
this lease is not comparable because of significant incentives for
the Commonwealth and a discounted starting rent.

But the ALP says this lease establishes that when the Centenary
House lease was signed in the early 1990s, the Commonwealth was
prepared to enter into long-term leases involving fixed
escalators.

"Centenary House was not the first and it was not the last
building to be constructed for the Commonwealth on the basis of
pre-commitment to a lease for long terms with fixed escalators
without the opportunity for downward market review.

"Buildings were constructed on like terms for the Commonwealth
in locations as diverse as Adelaide, Brisbane, Bankstown, Corrimal,
Hobart, Launceston and Wollongong.

"Whatever the history of rental growth in those areas, the
Commonwealth took a long-term view for the obvious purpose of
securing the construction of the particular building."

The ALP asks the royal commission to find that the lease was
negotiated at arms length, that there was no improper influence
brought to bear, that no minister exerted any influence, and that
there are no grounds to set the lease aside or have its terms or
conditions varied.

Lend Lease, in its submission, rejects suggestions by the
counsel assisting the inquiry that its negotiators took advantage
of malleable public servants.

It says it was entitled to assume that the Commonwealth
Government was "more than capable of looking after its own
interests".

"It was represented by its own specialist property advisers. The
client department was the ANAO [Australian National Audit office].
Standing behind them as the Department of Finance which has
responsibility for planning the entire expenditure of the
Commonwealth Government."

It said that if there was a failure on behalf on these bodies,
"that is not a circumstance that the Lend Lease parties created,
were aware of, or took conscious advantage of".

The royal commissioner, David Hunt, QC, is due to report by
November 26.